Amazon expects sluggish Christmas business – share collapses by 20 percent
Amazon only expects meager growth
Source: AP/Ross D Franklin
Amazon is not expecting any presents under the Christmas tree this year: The online retailer only expects sales of 140 to 148 billion dollars for the current fourth quarter. Analysts had hoped for more. That doesn’t go down well with investors.
Dhe world’s largest online retailer, Amazon, expects surprisingly weak Christmas business in view of increased inflation and fears of a recession. The group expects revenues of between 140 billion and 148 billion dollars in the final quarter, as announced on Thursday after the US stock market closed. That corresponds to a meager growth by Amazon’s standards of between two and eight percent compared to the same period last year.
Analysts had expected significantly more. Investors dropped the stock by more than 20 percent in an after-hours reaction.
The profit forecast also caused disappointment. Amazon forecast earnings in a very broad range of zero to $4.0 billion for the three months to the end of December. In the past third quarter, the company earned $2.9 billion, a good nine percent less than a year ago. Although sales grew by 15 percent to 127.1 billion dollars, they also remained below market expectations.
Even Amazon’s lucrative cloud division, which provides storage space and online services to other companies, has seen growth slow.
Amazon Web Services, the flagship of the cloud sector, increased revenue by 27 percent to $20.5 billion. In the previous quarter, the increase was just under a third. Although Amazon says it is tightening its costs in the face of inflationary pressures on gasoline, energy and transportation, spending is growing faster than revenue. Last quarter, operating expenses climbed 18 percent to $125 billion.
In addition, Amazon – like many internationally positioned US corporations – is suffering from the strong dollar, which reduces foreign earnings in the balance sheet after conversion into local currency.
Amazon’s CFO Brian Olsavsky announced in a conference call after the quarterly figures were presented that he would further reduce costs: “We are taking measures to tighten our belts”. There are said to be hiring pauses in some business areas, and the company also wants to discontinue certain products and services and reconsider investments. Austerity measures could, however, slow down growth that has been relatively sluggish recently.
Amazon – like the other large tech companies – already has a difficult time on the stock exchange. The share price has fallen by around a third since the beginning of the year. If things go down sharply on Friday, the stock market value could fall below the one trillion dollar mark.
iPhone leads Apple to plus in sales and profits
Apple has been able to defy consumer restraint so far, mainly thanks to the strength of the iPhone. In the past quarter, the group increased sales by eight percent year-on-year to $90.1 billion (90.4 billion euros). The bottom line is that profits improved from $20.55 to $20.72 billion, as Apple announced after the US stock market closed on Thursday.
The iPhone was a key driver of the business with sales increasing from $38.9 billion to $42.6 billion. As usual, Apple launched the new iPhone generation in September – but this time a week earlier than 2021.
The Mac computer business grew from around $9.2 billion to $11.5 billion amid a rapid contraction in the PC market. With the iPad, however, revenues in the fourth business quarter, which ended in September, fell from $8.25 to just under $7.2 billion.
In Europe, where Apple recently raised the prices for new iPhone models, in some cases significantly, in view of the weak euro, sales grew in the past quarter from $20.8 to $22.8 billion.
Apple shares were slightly down in after-hours trading after the price initially dropped by up to five percent in an initial reaction to the numbers.